UK house prices fell by 5.3% from August 2022 peak in fastest decline since 2009

ITV News' Business and Economics Editor Joel Hills explains why house prices have fallen

The average UK house price fell in August at the sharpest annual rate seen in 14 years, according to new figures from Nationwide.

House prices fell by 5.3% annually across the month, taking the average property value to £259,153, the building society said, marking the biggest annual percentage drop since July 2009.

Property values fell by 0.8% month-on-month in August 2023.

Nationwide said house prices are now around £14,600, typically below their August 2022 peak.

Robert Gardner, Nationwide’s chief economist, said: “August saw a further softening in the annual rate of house price growth to minus 5.3%, from minus 3.8% in July, the weakest rate since July 2009.”

He said the softening “is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels.

“For example, mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently.

Mr Gardner said a “relatively soft landing is still achievable”, providing broader economic conditions evolve in line with expectations.

He added: "In particular, unemployment is expected to remain low and the vast majority of existing borrowers should be able to weather the impact of higher borrowing costs given the high proportion on fixed rates, and where affordability testing should ensure that those needing to refinance can afford the higher payments.

“While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once (the Bank of England base rate) peaks.”

Mr Gardner said cash purchases have been “remarkably resilient, while purchases involving a mortgage have slowed much more sharply”.

Home-mover completions with a mortgage in the first half of 2023 were a third (33%) lower than 2019 levels, while first-time buyer numbers were around 25% lower, he said.

Buy-to-let purchases involving a mortgage were nearly 30% down. By contrast, cash purchases were up by 2%, he said.

“The relative weakness of mortgage activity reflects mounting affordability pressures as a result of the sharp rise in mortgage rates since last autumn, which would not have affected cash buyers,” he said.

“Indeed, a first-time buyer earning the average wage and buying a typical first-time-buyer property with a 20% deposit would now see their monthly mortgage payment absorb over 40% of their take-home pay (with a mortgage rate of 6%) – well above the long-run average of (around) 29%.”

There are signs that buyers are looking at smaller, less expensive properties, he added.

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